Regulatory reform of utilities could lessen the need for new power plants
Last week, the Clinton Global Initiative (CGI) announced that eight utilities “are committed to seeking regulatory reforms and approvals to increase their investment in energy efficiency by $500 million annually to about $1.5 billion annually.”
The utilities — Con Edison, Duke Energy, Edison International, Great Plains Energy, Pepco Holdings, PNM Resources, Sierra Pacific Resources, and Xcel Energy — represent nearly 20 million customers. The extra efficiency effort would “reduce carbon dioxide emissions by about 30 million tons” and “avoid the need for 50 500-megawatt peaking power plants.”
What regulatory reform? Our former President offered “to try to explain it to you in my basic English” which I reprint here:
Here’s the way you pay your electric bill in America, you go — the electric company gets permission to charge a certain rate per kilowatt hour, so the more you use, the more you pay, and this is the way it is everywhere. Only California today has the power to disconnect how much you pay from how much you use [actually, a few states do]. The significant thing is you can pay a little more kilowatt hour and pay over time for investments in energy efficiency. They’ve been working on this for 32 years. As a result in California, our largest state, the per capita energy consumption is only 55 percent of the national average.
Mr. Rogers’ idea is to have all the utilities have the option and eventually the responsibility to tell every homeowner and every business owner in the United States that they have a right not just to electricity but to the most energy efficient electricity available, and this is not a user-friendly practice. I think I said something about this yesterday, it’s not the easiest thing in the world to go out and figure out how to maximally insulate your home, and what is the most cost effective thing to do.
If the utilities do this, then they can put together a plan, go find all the contractors, get all the materials and if in effect pay for the cost on your home or in your office building as if they were building a mini power plant there. That is instead of financing it like a consumer loan for one year or a car loan for three, it could be financed over a twenty-year period or longer. The consumer then would have to pay a little more per kilowatt hour but never so much that they wouldn’t still have lower total utility bills because they’d be using so much less. So suppose they make your home 30 percent more efficient, they charge you 15 percent more per kilowatt hour, so your bill goes down 15 percent and they get the financing they need, collectively it will be much less expensive for them than building a new power plant. They’ll be able to finance and we won’t be contributing any more to climate change.
This is a simple, brilliant idea, but it has the capacity to fundamentally transform what we have been doing in America … This has a potential to fundamentally change the nature of this debate in a way that will prove its great economics and possible to effectively reduce greenhouse gas emissions …
If you want to jump start this process, by the way, and you’re an American, remember, I will say again, there are, I think, 11 states, Mr. McClarty would know this better, I think there are 11 states which have decoupled electric charges, I mean natural gas charges from natural gas usage, but only California has done this for electricity. We have to do this everywhere in America, then the utilities can become the drivers of maximum energy efficiency.
If you want to learn more about utility decoupling and related measures, go here.